Hey, welcome back to the Six Figure Mastermind. Today we're hitting contracts
hard. We have a lot of videos about contracts and we're going to discuss
specifically how to form a contract between two business partners so stay
tuned.
Congratulations. You've got a partner in business, now it's time to draw up a
contract and make sure all of your assets and your liabilities are covered.
Let's talk about five key things that that contract needs to include in order
to be a successful contract between these two business partners. First thing
that you're going to need to include is all pertinent contracts contact
information for all parties involved. You need to make sure in the contract in
writing all of the phone numbers, addresses, emails, physical addresses,
everything is covered, all the names, everything is outlined very very clearly
in the contract. I mean, you think that's a no-brainer but sometimes the contract
will forget to name the entire business name or they'll breviary that way
describing. You can get into hot water when that happens so make sure all of
the contact information is involved right in that contract for every single
party involved. Step number two, if you're doing a business contract between
partnerships, it's a really smart idea to have an LLC in place, that way you are
protected and your personal assets are protected should anything go south
either with your partner or whatever the contract is dealing with. Have an LLC set
up. You can get them usually very inexpensively online but it is
investment worth making. An LLC, having that in place and having the LLC rather
than you personally on the contract is going to make a world of difference
whenever the contract or if ever the contract is called into question. Number
three, in your contract, you need to outline the benefit split between the
parties. Now the reason you're doing business
together is obviously because your business and their business are both
going to be benefited. Contracts only exist in a win-win situation typically
between partnerships so when you have that benefit split, you need to have an
outlined in detail in your contract so every party is aware of what to expect
as far as the benefits. The fourth thing you need to have in your contract is the
liability split, just as there's no benefit split, there's also a risk
associated with it. Whatever partnership you're going into. So you need to have it
outlined very very clearly in your contract, who is responsible for what
portion of the liability. You've got your benefits outlined, you've
got your liabilities outlined, what should happen if a partnership were to
leave the contract? What should happen if a partnership were to experience a
natural disaster? What would happen if the business deal that you're both
investing in goes south? Who's responsible for that? All of that needs
to be very very clearly outlined and it just builds your confidence and it
builds your potential partners confidence in your contract as well.
Number five thing that you must have in your business contract is an exit
strategy. You don't know the duration of your contract until it's down on paper.
During the duration of your contract, one of your business partners could pass
away, one of your business partners could have a family emergency, one of your
business partners could have a natural disaster come up, you just don't know so
in order for you to have an effective contract, you need to have an exit
strategy built in. Now what's an exit strategy? An exit strategy is a way for
us someone to get out of the contract with whatever penalties or whatever
liabilities are included so for example, let's say that you're buying a home and
you are the management partner of that property and you've got someone who's
bringing in the cash and credit to the table and you're splitting those assets
50/50, you're splitting the monthly rent that comes in from the tenants 50/50 and
you're splitting the equity of the home when it sells 50/50, all of that needs to
be included in your contract.You also need to include the liability in your
contract. Let's say that something should happen inside the home, maybe the water
heater goes out or maybe a natural disaster occurs or maybe the driveway
needs to be replaced or something needs to be repaired, all of those repair costs
need to be outlined in your contract so that you know who's responsible
financially for backing up each one of those things. Now let's say in this
contract that you have a partnership where you're dealing with two sets of
people and maybe you're dealing with an LLC over here who's got the main
business partner plus his business partner and then on this side you've got
yourself and then maybe a spouse, let's say during the duration of that contract
your business partners that you're dealing with this LLC over here, that LLC
could actually split, maybe those two business partners one of them
wants to buy the other out or maybe you know, something bad happens between the
two of them and they don't want to do business together anymore but they're
both involved in your contract, they both have stake or claim in that contract. You
need to have in your contract an exit strategy for any one of those members of
any one of those partnerships to leave the contract so let's say that one of
those two business partners wants to leave the contract, all persons and all
entities need to have an exit strategy. Maybe for example you'll say that should
one of the entities leave their LLC then the contract remains in force only for
the person that is still involved in the LLC and whoever leaves it abandons there
are liabilities and expectations of the contract. Whatever it is, it needs to be
clearly outlined, equitable and signed in your contract. So when you make a
contract between two business partners, you have a lot of things that are
getting to members so let's just really recap real quick. You need first of all,
to have all important information include in the contract, all contact, all
email or phone everything in there needs to be outlined in the contract.
Second thing, include an LLC, be part of an LLC for yourself, for your contract so
you're not putting your personal stake on the line when it comes to do this
business dealing. Number three, include the benefit split. Everyone needs to be
fully aware of what the full benefits are and what they can expect to receive
from that contract. Number four, include a liability split. Who's liable if
something goes south and how is that going to occur? Number five, include an
exit strategy in your contract. You know if you ever go on Google and you want to
look up great ideas for contracts, Google has so many you know sample contracts
and things you can take ideas from and build your own contract. I also highly
recommend that you watch our video series right here on six figure
mastermind for all of our contract, ideas and concepts and tutorials. These
contracts are, they cover what to do if the contract fall south, what to do if
you know, what is the contract legally binding or not but if your contract
between your two business partnerships has these five things then you're going
to be covered and you're signed sealed and delivered.
So hopefully contracts seem a lot less overwhelming for you now. Really they're
very quite simple so leave a comment below, ask your questions about what you
need to know about contracts. I will see you tomorrow.